The Unassuming Economist

My paper with Davide Furceri on the effects of capital account liberalization on inequality is now forthcoming in the Journal of Development Economics and is available (link) at the JDE website. We find that capital account liberalization is associated with a persistent increase in the share of income going to the top. We investigate three channels through which these impacts could occur. First, the impact of liberalization on inequality is stronger where credit markets lack depth and financial inclusion is low; positive impacts of liberalization on poverty rates also vanish when financial inclusion is low. Second, the impact on inequality is also stronger when liberalization is followed by a financial crisis. Third, liberalization seems to alter the relative bargaining power of firms and workers: the labor share of income falls in the aftermath of capital account liberalization. For those without access to the JDE, an earlier working paper (link) version is available.

Figure 10. The effect of capital account liberalization on the top income shares

From the opening remarks of Vitor Gaspar, Director of the Fiscal Affairs Department:

“This issue of the Fiscal Monitor looks at inequality. First, it documents trends in inequality and examines the role of fiscal policy. Then, it examines the following three policies that are currently widely debated: first, progressive taxation; second, universal basic income (UBI); and third, public spending on education and health.”

Continue reading here.

The IMF’s latest report on Spain says that:

• “House prices have started to recover, but are still well below pre-crisis levels.”

• “UK citizens are also the main foreign buyers of houses, but their purchases declined in 2016.”

A new IMF report finds that “Over the past three years, the Spanish labor market has seen a strong turnaround, recovering more than a third of jobs lost during the crisis. This rebound has taken place on the back of significant wage moderation and regained external competitiveness, supported by labor market reforms. Employment has been growing across sectors, with services accounting for 80 percent of net employment creation, marking a sectoral shift away from construction. Except for some fast-growing smaller sectors such as information and communications, the new service-sector jobs are generally in the lower-productivity segment, including in tourism-related activities, and just over half are of temporary nature. Job growth has also varied across regions, reflecting different employment situations and sectoral specializations. Generally, the newly created jobs make sub-optimal use of existing skill patterns in Spain, with over-skilling becoming more prevalent and persistent skills gaps among the lower-educated preventing many from finding employment.”

On cross-country:

• Finance and housing in Central and Eastern Europe – a demand-side approach – National Bank of Romania
• Affordable housing key for development and social equality, UN says on World Habitat Day – UN
• Quarterly Review of European Mortgage Markets Q2 2017 – European Covered Bond Council
• Hypostat 2017 – European Covered Bond Council
• Ownership rates in Europe – European Covered Bond Council
• Capital flows into European real estate are ‘developing not cooling’ – PropertyEU

On the US:

• The 2017 National Rental Housing Landscape – NYU Furman Center
• July 2017 Market Report: Almost Half of U.S. Homes Are Worth More Now Than Before the Bubble – Zillow
• 15 Favorites From Zillow Group Report on Consumer Housing Trends Report 2017 – Zillow
• A More Timely House Price Index – The Review of Economics and Statistics
• The real cause of the America’s housing bubble was foreign money – Financial Times
• The Negative (and Positive) Spillovers of Concentrated Foreclosure Activity in New York City – Harvard Joint Center for Housing Studies
• Overregulation Is the Main Block to Affordable Housing – Wall Street Journal
• Why Fall Should Be Hunting Season for Starter Home Buyers – Trulia
• Land-Use Regulations, Property Values, and Rents: Decomposing the Effects of the California Coastal Act – Federal Reserve Bank of Philadelphia
• Housing as a Safety Net – Urban Land Institute
• Housing as an Asset Class – Urban Land Institute

On other countries:

• [Canada] A novel approach to affordable housing in Canada – CMHC
• [Canada] Too Many Bedrooms, Not Enough Housing? – University of B.C.
• [China] China steps up battle against runaway property prices – Financial Times
• [Germany] Assessing Recent House Price Developments in Germany: An Overview – Monetary Policy, Financial Crises, and the Macroeconomy
• [Ireland] Irish House Price Report Q3 2017 – Daft.ie
• [Israel] A Housing Plunge Doesn’t Concern Israel’s Top Economic Adviser – Bloomberg
• [Macau] Macau’s amazing, incredible, soaring property prices – Global Property Guide
• [United Kingdom] Rent control could deepen the housing crisis in UK’s most expensive cities – Centre for Cities
• [United Kingdom] Britain’s Housing Crunch – Bloomberg

Photo by Aliis Sinisalu